Retail Growth Continues to Trump Wholesale

The final Wholesale Leaders Report for 2010 from Reverse Market Insight (RMI) revealed the second consecutive month that retail endorsement activity out paced wholesale endorsements in terms of percentage growth. For the final month of 2010, retail endorsements grew by 8.5% to 4,343 units, while wholesale fell by 13.3% to 2,207. Total endorsements were flat from November to December.

The chart below demonstrates the shift in 2010 between retail (blue) and wholesale (yellow)

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The variation of total units marks a year where there was a power shift between the channels. In January of 2010, wholesale out produced retail 4,450 to 3,171, giving wholesale a 58% market share. By April, that number had narrowed to an almost equal split, and in May retail leapt over wholesale production at 2,465 to 2,086, which also coincided with the lowest producing month of the year. For the year as whole, retail produced 39,190 endorsed units to 33,493 for wholesale, giving retail 54% of the total market of 72,683 endorsed loans.

Considering the trend, one has to ask if this is a sign of brokers struggling for survival in a challenging market. RMI's analysis and insight from their clients suggests that brokers may be finding a more difficult time closing loans compared to competitors who are able to close loans in their own name. This also could be contributed to attrition as the number of participants in the industry has declined, it is safe to say that brokers are likely to be exiting the market at a faster pace than lenders.

Something to watch in the retail/wholesale debate, of course, is the impact of the exit of Bank of America from the reverse mortgage market. It could take some time for their production, in terms of endorsements, to be revealed in these activity reports, but their production of over 1,000 endorsements per month could provide opportunity to other players.

So as we open 2011, it is expected that Wells Fargo will maintain their position as leader of wholesale and retail production. With a 70% lead over MetLife, it seems unlikely to change, even though Wells Fargo maintains a very small wholesale production. The rest of the top 5 should be an interesting competition for the year. With Bank of America backing out, MetLife will initially assume the second position, but Urban Financial and Generation could pick up steam as the year wears on.

In terms of top producers without a wholesale division, One Reverse Mortgage should continue to lead, but 2010 upstart PNC Reverse Mortgage could continue their climb up the Top 100 list. 1st AAA Reverse Mortgage leads as the top producing non-lender originator.

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